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HubSpot (HUBS) Up 7.7% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for HubSpot, Inc. (HUBS - Free Report) . Shares have added about 7.7% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is HUBS due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Hubspot delivered stellar first-quarter 2018 results. The company reported non-GAAP earnings of 15 cents per share compared with 3 cents per share in the year-ago quarter. The figure also beat the Zacks Consensus Estimate of 11 cents per share.

Revenues of $114.6 million surged 39% year over year in first-quarter 2018. The figure surpassed the Zacks Consensus Estimate of $110 million as well as the guided range of $109.2-$110.2.

Year-over-year growth in revenues can be primarily attributed to its growing customer base, which increased 44%.

Quarter Details

Subscription revenues increased 40% from the year-ago quarter to $108.6 million, representing 95% of the total revenues. Professional services and other revenues were up 25% year over year to $6 million.

Average subscription revenue per customer decreased 3% year over year to $10,016. The decline can primarily be attributed to increased adoption of the company’s marketing starter product and sales starter product called Sales Pro.

Deferred revenues grew 43% year over year to $150.8 million, while calculated billings, defined as revenue plus the change in deferred revenues, came in at $126.2 million, up 38% year over year. Management noted that growth in billings was primarily driven by a forex benefit.

International revenues climbed 67% year over year, representing 36% of total revenues in the quarter, which also benefited from positive forex impact.

Management is positive about the performance of Hubspot One and Hubspot CRM tools. Additionally, the acquisitions of Motion AI and Kemvi reflect the company’s focus on integrating artificial intelligence (AI) in its offerings, as well as expanding solutions portfolio.

During the quarter, HubSpot announced that the company will adopt Google Cloud in order to strengthen its international cloud infrastructure. The extended partnership with Google will help it rapidly penetrate the SMB market in Europe.

Lastly, management is also optimistic about the launch of Customer Hub scheduled in 2018.

Margin and Balance Sheet

The company reported non-GAAP operating income of $5.6 million against a loss of $1.3 million in the year-ago quarter. Non-GAAP operating margin during the quarter came in at 4.9% compared with 1.6% in the first quarter of 2017.

Hubspot had cash, cash equivalents and investments balance of $557.5 million as of Mar 31, 2018. During the quarter, free cash flow came in at $17.9 million.

Guidance

HubSpot forecasts revenues in the range of $117-$118 million for second-quarter 2018.

Management expects non-GAAP operating income in the range of $5.3-$6.3 million for the second quarter. Moreover, HubSpot anticipates non-GAAP net income per share to be in the range of 14-16 cents.

For full-year 2018, HubSpot updated its guidance. The company now expects revenues in the range of $489-$492 million (previous guidance $481 million to $485 million).

Non-GAAP operating income is now projected in the range of $22-$25 million (previously guidance was in the range of $20-$24 million). Non-GAAP net income per share is now anticipated to be in the range of 59-65 cents (previously 51-59 cents).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been eight revisions higher for the current quarter

HubSpot, Inc. Price and Consensus

 

HubSpot, Inc. Price and Consensus | HubSpot, Inc. Quote

VGM Scores

At this time, HUBS has a great Growth Score of A and a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, HUBS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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